To be clear, I love Greek history, have collected a few ancient Greek coins, and do not have any animosity towards the country. In fact, I have attended a few Greek weddings and I will say, they are the best. I do not travel internationally often, but if I had my pick of places to visit, Greece would be at the top of the list.
I could even take it one step further and state that we owe Greece a lot: Democracy, Literature, Philosophy, Art and Architecture, not to mention the city-states stand against the Persian Empire. If they fail in that struggle, the world is most likely a very different place.
Having said all of this, I do not understand the focus Greece is consuming in the news. A point could be made that if Greece defaults on their debt, others (Italy, Spain, Portugal) could follow. It is also the case that an unfavorable resolution could mean the beginning of the end for the European Union.
My issues here are two-fold.
My first issue I will pose as a question: If the state of Washington defaulted on its debt, would that change your life? I don't think it would. The economy of Washington state is roughly the same size of Greece. In this instance, size does matter - and it matters very little to most of us.
In the 1980's when we had a mountain of toxic commercial loans dragging down the US financial system, we created the Resolution Trust. Essentially what we did then was create a good bank, where solid performing loans were placed; and a bad bank, where the assets no one wanted were placed. The good assets were bundled and sold off quickly. The bad assets were dealt with in an orderly fashion over time. Can we not treat Greece like this? Wall it off so that it is not a virus infecting the rest of the international monetary community.
My second issue is much more broad: no one seems willing to pay the price for bad decisions. If you are the auto industry and you over-promise on benefits and wages and find that you can no longer compete because of the obligations you have assumed and your products are not competitive, don't worry, the Government will bail you out. If you have purchased insurance on some financial instrument, and the insurer goes belly-up, don't worry about the risk, the US Taxpayer will prop up the insurer. If you have leant money to a government and that government cannot meet its obligations, are we now expected to bail out those lenders too?
This really has to stop. And frankly, it needs to stop before problems arise that are so big, they cannot be fixed. Can you imagine what would be taking place if this was one of our major trading partners (Great Britain, China, Russia, Germany, Japan), and not just a major tourist destination (that is harsh, and a statement for dramatic purposes)?
There is risk everywhere. No one is bailing out the restaurant owner who cannot keep his doors open because in this Great Recession, fewer people are dining out. No one is lining up to offer loans or extended credit to the custom home builder who owns a few lots, and builds a few houses each year, but now, because of the subprime mortgage crisis, his business is at a standstill, and the land debt is pulling him under.
I have no doubt we will eventually emerge from this period of muddling through. But there is still some pain to come:
- Consumer debt needs to be reduced
- Public debt, must be contained
- International Trade barriers need to be lifted
- Uncertainties (tax rates, the status of the new healthcare law) need to removed, so sound business decisions can be made
- Regulations need to be softened so that the velocity of ideas can resume with speed, and investment encouraged
I started out by stating that "we owe" Greece. They have contributed much to the world. I am not sure we are doing Greece any favors by lending them more money and providing greater debt for future Greeks to pay.
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